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Basic Energy Services Reports Second Quarter 2009 Results
MIDLAND, Texas, July 29, 2009 /PRNewswire-FirstCall via COMTEX/ -- Basic Energy Services, Inc. (NYSE: BAS) ("Basic") today announced its financial and operating results for the second quarter and six months ended June 30, 2009.

Basic reported a net loss of $21.2 million, or $0.54 per diluted share for the second quarter of 2009 on revenues of $118.8 million. In the comparable quarter last year, Basic reported net income of $18.7 million, or $0.45 per diluted share, on revenues of $251.5 million. Last year's second quarter included $4.2 million of after-tax merger related charges; excluding those charges, net income was $22.9 million, or $0.55 per diluted share.

EBITDA (defined as net income before interest, taxes, depreciation and amortization) for the second quarter of 2009 was $3.1 million, or 2.6% of revenue, compared to $65.0 million, or 25.9% of revenue, in the same period in 2008. Adjusted EBITDA (defined as net income before interest, taxes, depreciation and amortization, and also excludes the 2009 pre-tax goodwill impairment charge and 2008 pre-tax merger cost) for the 2009 second quarter was $3.0 million compared to $71.6 million in the comparable quarter of 2008. EBITDA and Adjusted EBITDA, which are not measures determined in accordance with U.S. generally accepted accounting principles ("GAAP"), are defined and reconciled in note 2 under the accompanying financial tables.

For the six-month period ended June 30, 2009, Basic generated a net loss of $37.2 million, or 0.93 per diluted share, excluding the impact of a $166.9 million after-tax ($204.0 million pre-tax) non-cash goodwill impairment charge. Net loss as reported for the 2009 six-month period was $204.1 million. During the comparable period last year, Basic generated income of $42.6 million, or $1.02 per diluted share, before $4.2 million of after-tax merger-related costs. Including these merger-related charges, net income for the first six months of 2008 was $38.4 million, or $0.92 per diluted share. Revenues declined 43% to $273.5 million in the first six months of 2009, compared to $481.4 million in the same period of 2008.

Basic recognized an effective tax benefit rate of 22% in the first six months of 2009 compared to a tax rate of 38% in the first six months of 2008. The low effective tax benefit rate in the first half of 2009 was primarily due to the $204.0 million goodwill impairment charge. The tax deductibility of the impairment charge was determined by the taxable basis of the goodwill considered to be impaired. A portion of Basic's goodwill was not tax-deductible, which decreased the benefit of the effective tax rate. Excluding the impact of the goodwill impairment charge, the effective tax rate for the first half of 2009 would have been a benefit of 37%.

Ken Huseman, Basic's President and Chief Executive Officer, stated, "As previously disclosed, the second quarter proved to be challenging due to current economic conditions and volatile commodity prices. We experienced soft demand in all our geographic markets and service lines with revenue declining 23% sequentially. Although demand improved modestly toward the end of the quarter, pricing eroded as we aggressively matched our competitors' pricing in order to protect market share and our current labor force. We believe pricing has now stabilized in most markets as service companies have generally reduced pricing as low as current activity and cost structures allow.

"During the second quarter we made significant reductions to our labor force and cost structure to match the demand for our services. We have reduced headcount by more than 27% from the 2008 peak, reduced payroll expense by approximately 40% and driven down the cost of purchased goods and services. The full impact of those cost reductions will be reflected in our third quarter results.

"We also continued to reduce our capital expenditures as the relatively young age of our fleet allowed us to spend less than $4.7 million supporting our existing fleet. The remaining $8.8 million in capital spending was related to completing several projects commenced in 2008 and adding a few strategic assets such as new salt water disposal facilities to improve our competitive positioning. Capital spending for the remainder of the year will be similarly restricted.

"For the remainder of 2009, we expect modest improvement in our operating environment. Oil prices above $50 per barrel should support strong demand for oil well maintenance services and capital spending for oil-related projects will likely continue to expand. In fact, through July we have seen an increase in activity for oil-related drilling and workover projects. Natural gas prices however, are not likely to support a significant increase in activity until mid-2010. With that demand outlook, we expect utilization to trend gradually higher but pricing to remain soft as competition remains fierce in all markets.

"Despite the tough market conditions, we are pleased to have announced the pricing of a senior secured bond offering that is scheduled to close on July 31, 2009. Our June 30, 2009 cash balance pro forma for this offering is approximately $163 million and we will have no principal payments related to our long-term debt until August 2014. We believe this level of liquidity uniquely positions our company to withstand any reasonable projection of a protracted down cycle in the industry."

Business Segment Results

Well Servicing

Well servicing revenues declined approximately 59% to $36.4 million during the second quarter of 2009 compared to $89.0 million in the same period last year and $48.8 million in the first quarter of 2009. At June 30, 2009, the well servicing rig count was 414. The weighted average number of well servicing rigs was 414 during the second quarter of 2009 compared to 403 during the same period in 2008 and unchanged from the first quarter of 2009.

Revenue per well servicing rig hour declined to $329 during the second quarter of 2009 compared to $400 in the same period in 2008 and $369 in the first quarter of 2009. Well servicing rig utilization declined to 37% in the second quarter of 2009 compared to 77% in the second quarter of 2008 and 45% in the first quarter of 2009.

Well servicing segment profit in the second quarter of 2009 was $8.6 million compared to $33.7 million in the same period in 2008 and $11.9 million in the first quarter of 2009. Due to the well services operating team's focus on managing costs in a challenging environment, segment profit margins remained at 24% of revenue in the second quarter of 2009, consistent with the segment profit margin that was produced in the first quarter of 2009, but down from 38%, which was achieved in the second quarter of 2008. The year-over-year decrease was due mainly to declining utilization and reduced pricing for well servicing rig services.

Fluid Services

Fluid services revenue in second quarter of 2009 was $49.1 million compared to $72.6 million in the same period in 2008 and $65.0 million in the first quarter of 2009. Basic added nine new trucks and retired 17 trucks during the second quarter of 2009, bringing the total number of fluid services trucks to 805 as of June 30, 2009. Weighted average number of fluid services trucks increased 22% to 808 during the second quarter of 2009 compared to 663 during the same period in 2008, mainly due to the trucks acquired in the Azurite acquisition in September 2008.

Average revenue per fluid services truck was $61,000 in the second quarter of 2009, down 44% compared to $109,000 in the same period in 2008 and declining 24% compared to $80,000 in the first quarter of 2009. Segment profit in the second quarter of 2009 was $13.7 million, or 28% of revenue, compared to $24.0 million, or 33% of revenue, in the same period in 2008 and $20.4 million, or 31% of revenue, in the first quarter of 2009. Continued weakness in drilling activity during the second quarter resulted in lower truck utilization and pricing as well as a drop in well site construction services, which caused lower revenue and segment profit per fluid service truck.

Completion & Remedial Services

Completion and remedial services revenues during the second quarter of 2009 declined to $29.4 million from $79.6 million in the same period in 2008 and $37.3 million in the first quarter of 2009. Segment profit in the second quarter of 2009 dropped to $7.9 million, or 27% of revenue, compared to $36.9 million, or 46% of revenue, in the same period in 2008 and $11.4 million, or 31% of revenue, in the first quarter of 2009. The drop in revenue and segment profit compared to the same quarter last year and sequentially was attributable to declining activity levels and lower pricing, both in the pressure pumping and wireline, and the fishing and rental tool service lines. As of June 30, 2009, Basic had approximately 139,000 hydraulic horsepower of pressure pumping capacity compared to approximately 128,000 hydraulic horsepower as of June 30, 2008.

Contract Drilling

Contract drilling revenues declined to $4.0 million during the second quarter of 2009 compared to $10.3 million in the comparable quarter in 2008, as rig operating days declined 55% to 314 days in the second quarter of 2009 from 699 in the same quarter last year. Sequentially, revenues for this segment rose 10% compared to the first quarter of 2009. Segment profit in the second quarter of 2009 declined to $650,000 versus $2.8 million during the second quarter of 2008, but rose compared to the $370,000 generated in the first quarter of 2009. The sequential rise in segment profit was primarily a result of the increase in drilling rig operating days.

Basic operated nine drilling rigs during the second quarter of 2009, the same as in the second quarter last year and in the first quarter of 2009.

Capital Expenditures

During the first half of 2009, Basic's total capital expenditures, including capital leases, were approximately $39 million, comprised of $13 million for expansion projects, $20 million for sustaining and replacement projects, and $6 million for other projects. Expansion capital spending included approximately $6 million for the fluid services segment and $7 million for the completion and remedial services segment. Other capital expenditures of $6 million were mainly for facilities and IT infrastructure.

As already announced, Basic plans to spend a total of approximately $57.5 million for capital expenditures during 2009, approximately $40.0 million will be paid for by operating cash flow and $17.5 million will be financed through capital leases. Included in the 2009 plan for capital expenditures is $25 million to complete 2008 projects. In 2008, total capital expenditures, including capital leases but excluding acquisitions, were $143 million.

Recent Events

On July 23, 2009, Basic Energy Services, Inc. announced that it priced a private offering of $225 million of Senior Secured Notes due 2014, which will bear interest at a rate of 11.625% per annum. The notes are being sold at 94.621% of their face amount. Basic Energy Services expects to close the sale of the notes on July 31, 2009, subject to the satisfaction of customary closing conditions. Basic Energy Services intends to use the net proceeds from the proposed offering to repay all outstanding indebtedness under its revolving credit facility. After the outstanding indebtedness under the credit facility has been repaid, Basic will terminate its $225 million credit facility. In the third quarter of 2009, Basic will record a write-off of approximately $3.5 million of unamortized debt issuance costs associated with the terminated credit facility.

The notes have not been registered under the Securities Act or applicable state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.

Basic Energy Services provides well site services essential to maintaining production of oil and gas wells within its operating area. The company employs approximately 3,800 employees in more than 100 service points throughout the major oil and gas producing regions in Texas, Louisiana, Oklahoma, New Mexico, Arkansas, Kansas and the Rocky Mountain states.

For more information, please visit Basic's website at http://www.basicenergyservices.com.

Conference Call

Basic will host a conference call to discuss its second quarter 2009 results on Thursday, July 30, 2009, at 9:00 a.m. Eastern Time (8:00 a.m. Central). To access the call, please dial (480) 629-9866 and ask for the "Basic Energy Services" call at least 10 minutes prior to the start time. The conference call will also be broadcast live via the Internet and can be accessed through the investor relations section of Basic's corporate website, http://www.basicenergyservices.com.

A telephonic replay of the conference call will be available until August 6, 2009 and may be accessed by calling (303) 590-3030 and using the pass code 4107764#. A webcast archive will be available at www.basicenergyservices.com shortly after the call and will be accessible for approximately 30 days. For more information, please contact Donna Washburn at DRG&E at (713) 529-6600 or email at dmw@drg-e.com.

Safe Harbor Statement

This release includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Basic has made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, including (i) changes in demand for our services and any related material impact on our pricing and utilizations rates, (ii) Basic's ability to execute, manage and integrate acquisitions successfully, (iii) changes in our expenses, including labor or fuel costs and financing costs, and (iv) the completion of expected financings. Additional important risk factors that could cause actual results to differ materially from expectations are disclosed in Item 1A of Basic's Form 10-K for the year ended December 31, 2008, subsequent Form 10-Qs filed with the SEC. While Basic makes these statements and projections in good faith, neither Basic nor its management can guarantee that the transactions will be consummated or that anticipated future results will be achieved. Basic assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by Basic, whether as a result of new information, future events, or otherwise.

Contacts: Alan Krenek, Chief Financial Officer
Basic Energy Services, Inc.
432-620-5510

Jack Lascar/Sheila Stuewe
DRG&E / 713-529-6600

                            -Tables to Follow-



                                Basic Energy Services, Inc.
        Consolidated Statements of Operations, Comprehensive Income and Other
                                    Financial Data
                          (in thousands, except per share amounts)

                                  Three Months Ended     Six Months Ended
                                       June 30,              June 30,
                                  2009         2008       2009      2008
    Income Statement Data:            (Unaudited)           (Unaudited)
     Revenues:
       Well servicing           $36,399      $89,018    $85,213  $169,537
       Fluid services            49,088       72,581    114,065   143,980
       Completion and
        remedial services        29,373       79,579     66,632   148,037
       Contract drilling          3,988       10,344      7,626    19,841

         Total revenues         118,848      251,522    273,536   481,395

     Expenses:
       Well servicing            27,825       55,293     64,742   103,759
       Fluid services            35,381       48,554     79,968    94,987
       Completion and
        remedial services        21,484       42,651     47,378    78,439
       Contract drilling          3,338        7,529      6,607    14,589
       General and
        administrative (1)       27,424       26,811     56,503    52,663
       Depreciation and
        amortization             32,413       28,732     65,150    56,764
       (Gain) loss on disposal
        of assets                   474         (809)     1,339      (584)
        Goodwill Impairment         (82)           -    204,014         -

         Total expenses         148,257      208,761    525,701   400,617

           Operating income
            (loss)              (29,409)      42,761   (252,165)   80,778

     Other income (expense):
       Interest expense          (5,974)      (6,453)   (11,710)  (13,802)
       Interest income              173          471        393     1,172
       Other income (expense)       118       (6,469)       252    (6,431)

     Income (loss) from continuing
      operations before income
      taxes                     (35,092)      30,310   (263,230)   61,717

     Income tax benefit
      (expense)                  13,856      (11,597)    59,169   (23,348)
     Net income (loss)         $(21,236)     $18,713  $(204,061)  $38,369

     Earnings (loss) per
      share of common stock:
       Basic                     $(0.54)       $0.46     $(5.13)    $0.94

       Diluted                   $(0.54)       $0.45     $(5.13)    $0.92


     Other Financial Data:
     EBITDA (2)                  $3,122      $65,024  $(186,763) $131,111
     Adjusted EBITDA (2)          3,040       71,599     17,251   137,686
     Capital expenditures:
       Acquisitions, net
        of cash acquired             40       24,381      1,190    51,239
       Property and equipment    11,403       26,596     25,187    45,023


                                        As of
                                June 30,     June 30,
                                  2009         2008
     Balance Sheet Data:             (unaudited)
     Cash and cash
      equivalents              $134,304      $77,784
     Net property and
      equipment                 714,560      665,922
     Total assets             1,068,393    1,209,776
     Total long-term debt       451,958      412,846
     Total stockholders'
      equity                    387,219      566,683


                                     Three months            Six months
                                    Ended June 30,          Ended June 30,
    Segment Data:                  2009         2008       2009      2008

    Well Servicing
    Weighted average number
     of rigs                        414          403        414       398
    Rig hours (000's)             110.5        222.3      242.8     424.8
    Rig utilization rate           37.3%        77.1%      41.0%     74.6%
    Revenue per rig hour           $329         $400       $351      $399
    Well servicing rig profit
     per rig hour                   $78         $152        $84      $155
    Segment profits as a percent
     of revenue                    23.6%        37.9%      24.0%     38.8%

    Fluid Services
    Weighted average number of
     fluid services trucks          808          663        811       654
    Revenue per fluid services
     truck (000's)                  $61         $109       $141      $220
    Segment profits per fluid
     services truck (000's)         $17          $36        $42       $75
    Segment profits as a percent
     of revenue                    27.9%        33.1%      29.9%     34.0%

    Completion and Remedial Services
    Segment profits as a percent
     of revenue                    26.9%        46.4%      28.9%     47.0%

    Contract Drilling
    Weighted average number
     of rigs                          9            9          9         9
    Rig operating days              314          699        562     1,344
    Revenue per day             $12,700      $14,800    $13,600   $14,800
    Drilling rig profit
     per day                     $2,100       $4,000     $1,800    $4,000
    Segment profits as a percent
     of revenue                    16.3%        27.2%      13.4%     26.5%

(1) Includes approximately $1,290,000 and $1,184,000 of non-cash compensation expense for the three months ended June 30, 2009 and 2008, respectively. For the six months ended June 30, 2009 and 2008, it includes approximately $2,665,000 and $2,264,000 of non-cash expense, respectively.

(2) This earnings release contains references to the non-GAAP financial measure of earnings (net income) before interest, taxes, depreciation and amortization, or "EBITDA." EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, Basic believes EBITDA is a useful supplemental financial measure used by its management and directors and by external users of its financial statements, such as investors, to assess:

    --  The financial performance of its assets without regard to financing
        methods, capital structure or historical cost basis;
    --  The ability of its assets to generate cash sufficient to pay interest on
        our indebtedness; and

    --  Its operating performance and return on invested capital as compared to
        those of other companies in the well servicing industry, without regard
        to financing methods and capital structure.

EBITDA has limitations as an analytical tool and should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income and operating income, and these measures may vary among other companies. Limitations to using EBITDA as an analytical tool include:

    --  EBITDA does not reflect its current or future requirements for capital
        expenditures or capital commitments;
    --  EBITDA does not reflect changes in, or cash requirements necessary to
        service interest or principal payments on, its debt;
    --  EBITDA does not reflect income taxes;
    --  Although depreciation and amortization are non-cash charges, the assets
        being depreciated and amortized will often have to be replaced in the
        future, and EBITDA does not reflect any cash requirements for such
        replacements; and

    --  Other companies in its industry may calculate EBITDA differently than
        Basic does, limiting its usefulness as a comparative measure.

    The following table presents a reconciliation of net income to EBITDA,
    which is the most comparable GAAP performance measure, for each of the
    periods indicated:

                                   Three months            Six months
                                   Ended June 30,         Ended June 30,
                                 2009         2008       2009      2008
                                    (Unaudited)           (Unaudited)
    Reconciliation of
     Net Income (Loss)
     to EBITDA:
    Net income (loss)          $(21,236)     $18,713  $(204,061)  $38,369
      Income taxes              (13,856)      11,597    (59,169)   23,348
      Net interest expense        5,801        5,982     11,317    12,630
      Depreciation and
       amortization              32,413       28,732     65,150    56,764
    EBITDA                       $3,122      $65,024  $(186,763) $131,111


    The following table presents a reconciliation of net income to "Adjusted
    EBITDA," which means our EBITDA excluding the goodwill impairment charge
    in 2009:

                                   Three months            Six months
                                  Ended June 30,         Ended June 30,
                                 2009         2008       2009      2008
                                    (Unaudited)           (Unaudited)
    Reconciliation of
     Net Income (Loss)
     to Adjusted EBITDA:
    Net income (loss)          $(21,236)     $18,713  $(204,061)  $38,369
      Goodwill impairment           (82)           -    204,014         -
      Merger-related costs                    6,575                6,575
      Income taxes              (13,856)      11,597    (59,169)   23,348
      Net interest expense        5,801        5,982     11,317    12,630
      Depreciation and
       amortization              32,413       28,732     65,150    56,764
    Adjusted EBITDA              $3,040      $71,599    $17,251  $137,686

    We believe Adjusted EBITDA is useful for management and investors in
    connection with comparisons of EBITDA excluding the items represented by
    the goodwill impairment charges in 2009.

SOURCE Basic Energy Services, Inc.

http://basicenergyservices.com

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